Large countries D and F operate under fixed exchange rates and full capital mobility. Both have strong positive correlation and receive positive identical-sized ut and yet+1 shocks together. They have identical positive gammas. The only difference is that the coming boom is thought to be shorter-lived (less persistent) in D than F. (You might work this question out in iD-iF graphs - not to be submitted.) a. What is the proportionate size difference between the bank rate changes in D and F. Which direction do their interest rates move? b. Which country's currency is undervalued? c. What happens to the 'world' interest rate in equilibrium if neither country sterilizes? d. What different equilibrium arises if D sterilizes but F does not? Describe differences. e. What dynamic process arises when both large countries attempt to sterilize? f. Given your understanding of the benefits and costs of flexible exchange rates, would both countries likely want to flex exchange rates outright or try to restore a new fixed exchange rate regime right away? HTML Editorin